Resource Generation (ASX: RES) is set to acquire additional coal tenements from Exxaro Resources, which once approved will increase the company's Boikarabelo coal Resource by 31% and enhances the company's ability to expand to Stage 2.
Exxaro's tenements host an Indicated Resource of 974.5 million tonnes of coal, excluding shale content. The quality of coal is consistent with the Boikarabelo tenements.
The JORC Resource at Boikarabelo, one of South Africa's largest remaining deposits, will increase to a total of 4.09 billion tonnes, alongside the JORC Probable Reserve of 744.8 million tonnes, excluding 50% for shale content.
Resource Generation's Black Economic Empowerment subsidiary, Ledjadja, granted a put option to Exxaro earlier this year, under which Exxaro can sell the prospecting rights over four properties to Ledjadja.
Exxaro has exercised the put option, which is subject to approval by the Department of Mineral Resources.
Resource Generation anticipates the approval process to continue through until mid-2013.
The coal tenements include Swelpan and Kleinpan, which land is owned by Resource Generation.
Just yesterday Resource Generation revealed it had substantially lowered the estimated capital cost of Boikarabelo by US$120 million to US$630 million.
The cost of Boikarabelo's planned 45 megawatt power station, for which tenders have been received, has been removed from the capital expenditure estimate for stage one of Boikarabelo's operations.
Instead, Eskom has agreed to commit to the supply of sufficient power for stage one of the mine's operation as early as 2014, after the first generating unit at its new Medupi power station is in commercial operation.
This will meet Resource Generation's target of beginning coal production early in 2015.
Importantly, this will reduce the amount of equity funds required to develop the project, simplifying the funding and construction phases of stage one of the mine.
Stage one of the mine development targets saleable coal production of 6 million tonnes per annum, with stage two planned to increase to more than 20 million tonnes per annum.
Resource Generation will decide in 2013 whether to proceed with the construction of the power station.
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